For the better part of the last decade we’ve been in a seller’s market, and each year this seller’s market has gotten stronger. Even during the height of the COVID-19 pandemic in 2020, the U.S. real estate market reached record sale and sale price numbers despite the fact that the country was experiencing the worst economic downturn since 2008. When will this seller’s market end? The truth is that based on historical averages, we should have shifted into a buyer’s market two or three years ago. In this article, we will be discussing the possibility of an impending market shift and how to spot the red flags.
What is a market shift?
Let’s start by defining a real estate market shift. One primary measurement of the real estate market is months of inventory. Months of inventory is an estimation of how many months it should take to sell all the active listings on the market if no other homes were listed. We started 2021 at a historically low national average of about 1.5 months of inventory. The shift to a buyer’s market happens at six to seven months of inventory. Basically, the current active listings would have to quadruple in order for the U.S. to be in a buyer’s market.
Stall in prices
An early sign that real estate professionals will see is a stall in home sale prices. It’s a good idea to stay in touch with your agent or friends in the industry so they can keep you up to date. The estimates you find online are lagging and don’t represent what is happening in your market right now. Realtors will experience this change in real-time.
Fewer buyers in the market
Here’s another reason to stay in touch with a real estate professional. Agents notice when showings on their new listings are down. Sometimes the slow response to a listing may just have to do with timing. But if this happens on more than one or two listings, those listing agents know something is up. Many listing agents also work with buyers and will have access to feedback on what has happened to buyer motivation.
Increase in listings By the time homes in your neighborhood start sitting on the market for longer and more signs start going up, you know the shift is upon you. If one house seems to be taking a little longer to sell, that’s no